Government falls short of small-business goal

The federal government narrowly missed its goal for small-business contracting work in 2012, making it the seventh consecutive year it has missed the goal.

Each year, the federal government aims to send 23% of its contracting dollars to small businesses. In 2012, small firms received 22.25% of that money - $89.9 billion.

The goals are especially difficult when federal agencies are looking to cut costs, said Small Business Administration associate administrator John Shoraka.

"There's fewer dollars available out there," Shoraka said. "That is the environment that we are in as a federal government."

The last time at least 23% of federal contracting dollars went to small businesses was in 2005, and SBA press secretary Emily Cain noted that data were less accurate then than they are now.

Two other goals were also missed this year:

• Only 4% of federal contract dollars went to small businesses owned by women, short of its 5% goal.

• Businesses in "historically underutilized" areas received only 2.01% of federal contract money, short of the 3% goal.

Republican Rep. Sam Graves, chairman of the House Committee on Small Business, sharply criticized federal agencies, including the SBA, in a written statement released Tuesday.

"The fact that the federal government hasn't met this meager 23% small-business contracting goal for seven years is simply unacceptable, and further proof that our government continues to give lip service to small companies," he said in the statement.

Most agencies came close to meeting their individual goals, with some exceptions. The Department of Energy only gave 5.15% of its contracting money to small businesses, well short of its 10% goal. The National Science Foundation gave 15.38% of its contracting dollars to small businesses, short of its 20% goal.

Despite the fact that the federal government has consistently missed its goal, concerns have been raised about its small-business contracting numbers being inaccurately high. In October 2012, an SBA Inspector General report said small-business contracts were widely misreported and that "many contract awards that were reported as having gone to small firms have actually been performed by larger companies."

In some cases, small businesses have acted as a "pass-through" and sent most of the profits and work from a government contract to larger businesses that are ineligible for the contract, according to testimony from SBA Inspector General Peggy Gustafson in October 2011.

The federal government did come closer in 2012 to reaching its goal than in previous years. Only 21.65% of federal contracting dollars went to small businesses in 2011. And the SBA said a total of $376.2 billion in contracting work went to small businesses in President Obama's first term, a $48.1 billion increase over President George W. Bush's second term.

And the federal government did surpass some goals in 2012. Small "disadvantaged" businesses received 8% of federal contracting dollars, surpassing its goal of 5%. And businesses owned by disabled veterans received slightly more than the government's goal of 3%.

Individual agencies may not be entirely to blame for neglecting to offer contracts to small businesses, said Ben Geyerhahn, director of entrepreneurship and capital at advocacy group Small Business Majority. Making sure small businesses know about their options and apply for contracts could be a key in getting more of these contracts to small businesses.

"It's hard to complain when there were plenty of contracts but not enough small businesses to find them," Geyerhahn said.